There’s lots of talk about executive compensation these days. With the proxy reporting season in full swing, the media, academics, CEOs and boards, and many a laid-off person will be scrutinizing, and agonizing, over what are sure to be outlandish numbers in the midst of the most severe business meltdown in almost 80 years. But there is one group of onlookers that will be particularly attuned this season, our duly-elected members of Congress. And what will they say?
The opening gambit is now well-known. Let’s talk about 90% punitive taxes on the AIG scoundrels. Let’s be sure to look for other, perhaps less draconian, but perhaps not, methods to extract penalties on CEOs who continue to earn many millions seemingly oblivious to what is going on around them. It can no longer be business as usual. Barney Frank will talk tough, but if I were a betting man, I’d being selling him short.
Why? Not because Mr. Frank is not able, intelligent, and determined. He is all of these things, and more, but he is up against a guerilla army fighting to protect their home turf, and unafraid to engage in any counter-attacks they can dream up. The reality is that for Congress, CEO pay is just the latest outrage-de-jour, and like hummingbirds moving from one source of nectar to another, there will soon be other places to seek justice. It’s not that Congress has A.D.D., but rather that they have a lot to do, too much to stay focused for the time it will take (that is, forever) to rein in CEO pay.
And what of the insurgents? There is an army of able, intelligent, and even more determined tax attorneys, compensation consultants, and board advisors at work right now looking for new ways to ensure that CEOs continue to get what they get. They will not move off task to do something else for they are not hummingbirds by a long shot – pit bulls might be a better image to conjure up. They have all the incentive in the world to dig for loopholes, and they are very, very good at it. Executive pay will change in style – more stock grants and less stock options, more salary and less bonus, and there will be some short-term adjustments down – but at the end of the day a new equilibrium will be reached that will look remarkably similar to where we have been. And you can take that to the bank.